Nationwide Financial and LPL Financial have partnered up on an advice program for workplace retirement plans that lets plan participants work with a personal advisor or not, as they wish.
This is not the first retirement advice-related partnership for either firm, but this particular arrangement is getting attention because of the heft of the players, and because the program represents a high-profile uptake on changing attitudes toward plan-provided advice.
About the heft: At Nationwide, over half (53 percent) of the $18.2 billion in 2012 sales came from retirement solutions, according to the company’s annual report. As for LPL, it is the nation’s largest independent broker/dealer by revenue, serves about 13,600 financial advisors, and supports 4,500 financial advisors licensed with insurance companies. LPL made news this week when the Financial Industry Regulatory Authority (FINRA) announced that it fined LPL Financial $950,000 for supervisory deficiencies related to the sales of alternative investment products.
Under the new arrangement, Nationwide has integrated LPL’s Worksite Financial Solutions platform into its 401(k) products. The integration will help LPL advisors provide their retirement plan participants with financial advice. This platform offers not only enrollment, employee financial education and financial wellness services but also, for a fee, access to advice during the working years and upon transition to new employment or “retirement and beyond.”
Growing receptivity to advice
Since the last recession and especially in the last couple of years, employers have become much more open to offering access to advice in 401(k) and similar plans, said David Reich, executive vice present-LPL Retirement Partners, San Diego, Calif.
Ten years ago, employers focused plan attention on saving for retirement but this focus was not outcomes-based, he said. That began to change after the 2008-2009 recession, as “employers started realizing that employees really need advice” in order to be better prepared at retirement. This led to a growing recognition that offering advice could help firms “do the right thing for their people.”
The changing mood spurred LPL to develop a proprietary advice program, including a face-to-face advice option, in 2012, he said. LPL Retirement Partners has now signed up four record-keepers, including Nationwide, has five more on ramp for the middle of this year and expects two more by year-end.
That fast growth supports Reich’s view that employer receptivity to advice programs is on the rise. Plan sponsors still do have anxiety around exposure to potential liability for offering an advice program, but employer angst around employees not being prepared for retirement is spurring employers to add the
advice programs anyhow, he said.
Nationwide has been pursuing advice options, too. It fact, the company already has five relationships with independent investment advisory firms, according to Joe Frustaglio, vice president-private sector retirement plan sales at Nationwide.
Some of these Nationwide arrangements have been in place since the early 2000s, he said in an interview. But, like LPL, Nationwide has noticed greater interest from plan sponsors today than a few years ago.
“Plan sponsors are more educated about advice now,” Frustaglio said. They are also feeling pressure to take steps to ensure that Americans stay financially healthy. That is translating into employers wanting to offer “the best available solution for the employees and plan participants.”
The new partnership with LPL will compete with Nationwide’s current third-party advice programs, he said. But in view of the “inadequacy of retirement savings” that exists today, Nationwide decided to expand offerings to include LPL as well, he said.
They need the help
Nationwide is committed to offering advice options because participants “need and ask for help,” Frustaglio said.